If you provide goods on credit, retention of title is not
enough. To protect your business, you must:
Ensure that your terms and conditions are up to date, and
include the right to register a security interest; and
Register your security interest on the PPSR; and
Make sure that you register using the correct details and the
correct property as security; and
Register within the time limits, which vary depending on the
nature of the security interest.
The Personal Property Securities Act (Cth) 2009 (PPSA) has been
in place since 2012, but our Business Lawyers find a lot of
businesses are not aware of how it works or underestimate the risks
in not getting it right.
WHAT ARE THE RISKS?
No registration or incorrect registration has caused great
concern in the business community. Even the US Chamber of Commerce
has put in its two cents worth, sending a letter to Attorney
General Senator George Brandis raising concerns that the Act is
depriving American Companies of property leased to Australian
Companies. Their concern was over four gas turbines worth over $50m
where the leasing company had failed to register the property
leased on the Personal Property Securities Register and stood to
lose the $50m.
While the US Chamber of Commerce's letter was directed at
the PPSA's effect on the hire industry, all businesses are at
risk if they do not correctly protect their interests on the
Personal Property Securities Register. Not only is registration
essential, but the registration must also be correct. A failure to
register properly means that a business is at risk of losing their
priority to a later registration, as they may not have properly
perfected their security.
Matters that seem straight forward such as the correct spelling
of a customers name, registering over the incorrect ACN, failing to
register promptly, or incorrectly describing the property secured
by the registration, can all lead to the registration failing, and
the business losing its property to a liquidator, or be in a
dispute with a liquidator or administrator. This will be despite
any retention of title provisions in your terms and conditions.
While these may seem like minor accidents, they are widespread.
For example, we have seen a case where not one of the 62
registrations over a company were found to be correct, which means
they all lost priority to a correct registration further down the
list, namely the bank. We have seen multiple businesses lose goods
worth in the millions to liquidators, because they have failed to
properly register their interests.
WHAT DO YOU NEED TO DO?
To protect your business, you must ensure that your
documentation, including any terms and conditions are up to date.
You must also register your security interest on the Personal
Property Securities Register, and make sure that any registration
is completed correctly and within the time limits. Retention of
title provisions on their own do not provide any protection should
the customer go under.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).